Since its IPO, Liziyuan Company's performance growth has been stagnant for three years, a scenario that founder Li Guoping may not have anticipated. Initially, the sweetened milk products propelled the company's rise in the market, but as time passed, the preference for "a sweet tooth" seems to have become the company's inescapable predicament, struggling to find new points of growth.

With over thirty years of experience in the food and beverage industry, Li Guoping has made multiple attempts to find a turnaround. Liziyuan successively launched various new products such as fruit and vegetable yogurt, coconut milk, and zero-fat products, aimed at catering to a younger and more fashionable trend. Nonetheless, the eagerly-anticipated miracle in the market has not materialized.

Recently, Fang Jianhua, the vice president of Liziyuan (605337.SH), caused a short-term trading scandal during the process of reducing his shares in the company due to accidental purchases made by family members, leading to an unexpected public relations snafu. Although this episode was absurd, it also brought renewed public attention to the food and beverage company.

Since the company's establishment, dairy drinks have been Liziyuan's mainstay for nearly thirty years. By 2023, dairy beverage business still accounted for 98.31% of the company's total revenue. Sweetened milk became its main sales product, but the market trend also hinted at potential risks. In last year's annual report, the company warned that long-term reliance on sweetened milk could have a significant impact on performance.

Currently, the dairy beverage market is highly competitive, with heavyweights such as Yili, Mengniu, Bright, and China's Want Want occupying a place in the market, and companies like Yang Yuan Drinks, Chengde Lulu, and Junyao Health also joining the competition. Liziyuan is facing unprecedented severe challenges on a battlefield where failure is not an option.

From 2021 to 2023, Liziyuan's dairy beverage product sales volume showed a fluctuating trend, with inventory levels surging 43.13% last year to a high not seen in the past three years, undoubtedly intensifying the urgency to find new growth points for the company.

Despite Liziyuan's efforts to change the status quo of "a sweet tooth," while maintaining the stable taste of the classic "sweet milk," it also launched new products such as milk coffee, coconut milk, fruit and vegetable yogurt, lactose-free oat milk, and zero-fat lactobacillus beverages. However, these new products have not made a big splash in the market, and the company's non-dairy beverage business performance in revenue and profitability has been lackluster.

In 2023, the revenue from dairy flavored drinks, composite protein beverages, and other products accounted for only about 1.69% of the company's total revenue. Facing an increasingly competitive market environment, Liziyuan announced plans to launch aseptic canned and cup-packed fruit juice beverages, sparkling milk-flavored drinks, and fruit grain juice beverages in 2024, aiming to find new breakthroughs.

In order to advance the development of new products, the company has been continuously increasing its R&D investment. From 14.154 million yuan in 2021, R&D expenses have risen to 19.3367 million yuan in 2023, and the proportion of expenses to total revenue has also increased from 0.96% to 1.37%.

The enterprise's reliance on the risks brought by its flagship product has become increasingly evident, encountering obstacles to market expansion and presenting a tough challenge for breakthroughs. The company's main revenue is concentrated in the East China region, where the income contributions from 2021 to 2023 were 782 million yuan, 729 million yuan, and 702 million yuan, respectively, accounting for 53.38%, 52.15%, and 50.02% of the total revenue. Despite plans outlined in the prospectus prior to the company's IPO to expand the national market share while stabilizing the East China market, recent market conditions reveal sluggish growth in the core East China market; central and southwest markets maintained single-digit growth, while the northeast and northwest markets experienced significant declines. Even though emerging markets in South and North China grew rapidly, their combined sales still accounted for less than 8%.

Last year, the company achieved a revenue of 1.374 billion yuan through distribution channels, with a year-on-year growth of only 0.59%. However, at the same time, the number of dealers decreased by 589 from the previous year, down to 2,585. Similar to many food and beverage enterprises, the company also tried to make a mark in the online market, yet the sales growth of online channels was also very slow. Last year, the online sales revenue was 40.1638 million yuan, a decrease of 1.38% from the previous year.

Since entering the capital market in 2021, Liziyuan seems to have reached the peak period after listing. However, from 2021 to 2023, the company's revenues were 1.47 billion yuan, 1.404 billion yuan, and 1.412 billion yuan, respectively, while the net profits attributable to the parent company were 263 million yuan, 221 million yuan, and 237 million yuan. Overall, both revenue and profit appear to be stagnating or even declining. Li Guoping, a native of Jinhua, Zhejiang, founded Liziyuan in 1994. For thirty years, it became well-known for its single product, sweetened milk, but has not created any new hit products since then.

Sweetened milk first appeared in the 1980s and 1990s when domestic milk production was insufficient, and fresh milk supply was tight due to the limitations of production techniques and logistics conditions, making milk-containing beverages an alternative. In 2005, Wahaha launched Nutri-Express, and by 2013 its sales exploded, becoming Wahaha’s billion-yuan product. Enterprises like Want Want China, Yili, and Mengniu also launched their milk-containing beverages, which included several billion-yuan bestsellers.

During the golden era for milk-containing beverages, the aforementioned enterprises conquered the market with the nutritional value, taste, and flavor of their products. However, as room-temperature milk gradually became more popular, and as consumers became more health-conscious, more options appeared on the market. Liziyuan chose to stick with sweetened milk, seemingly overly reliant on its potential in both production capacity and market arrangement.

In terms of product promotion, Liziyuan has not shown any highlights. What they can offer is just the slogan "Fresh Fresh Liziyuan" and marketing based on nostalgia and sentiment. It’s unclear at present whether the new spokesperson, Cheng Yi, can bring positive changes to Liziyuan.